Ethanol Blog

Small Refineries Threaten to Sue EPA on Waivers Delay

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Small-refinery companies have told EPA they intend to sue if the agency does not act on 38 pending requests for small-refinery waivers. (DTN/Progressive Farmer image by Getty Images)

Small-refinery companies are planning to sue the EPA for its current ongoing delay in issuing a decision on 38 pending requests for waivers to the Renewable Fuel Standard, a lawyer representing the companies said in a letter Tuesday to EPA Administrator Andrew Wheeler.

Small-refinery interests have been pressing EPA on a number of fronts since President Donald Trump ordered the agency, along with the USDA, to review the small-refinery waivers program.

To-date, the EPA has granted more than 50 waivers dating back to 2016. By EPA's own estimates, the waivers have led to about 2.61 billion ethanol-equivalent gallons not being blended in gasoline.

In recent weeks, small-refinery interests have pressed Wheeler to not share those refineries' confidential business information with U.S. Secretary of Agriculture Sonny Perdue or other USDA personnel, for fear the information will be shared with agriculture interests trying to stop the granting of additional waivers.

Perkins Coie attorney LeAnn M. Johnson Koch said in the letter to Wheeler the refining interests she represents intend to sue within 60 days unless the agency makes a decision on the pending waivers.

"EPA's delay in issuing decisions on the 2018 petitions is compounding rather than relieving the harm to small refineries," Johnson Koch writes.

"The uncertainty over whether or not hardship relief will be granted has tied up small refineries' precious working capital and prevented them from investing in their refineries to make efficiency improvements to remain competitive and profitable. Because EPA did not decide the 2018 petitions before the deadline for compliance, small refineries were forced to retire RINs (renewable identification numbers), leaving their RINs stranded in EPA's coffers, or carry forward a deficit and, in the meantime, buy more RINs for 2019 compliance that will not be needed if 2018 relief is granted."

She said 2017 RINs that were retired are now invalid and "2018 RINs, which can only be used to satisfy 20% of an obligated party's 2019 RVO, are diminishing in value each day as we approach the 2019 compliance deadline."

Johnson Koch continues to say Perdue is influencing EPA's efforts in looking at the waivers program.

"While small-refinery owners continue to wait for the decisions, recent media reports indicate that the secretary of agriculture has been attempting to influence the decision whether to grant small-refinery hardship relief," she writes. "As a matter of law, the secretary's interference is improper because the Clean Air Act does not give the secretary any authority or role over the petitions.

"The secretary of agriculture and other opponents of small-refinery hardship relief oppose hardship relief, not on the merits of the need for relief, but on the mistaken belief that hardship relief destroys demand for ethanol and biofuels."

Johnson Koch told Wheeler there is no proof that small-refinery waivers have hurt ethanol demand.

"Hardship relief does not destroy demand for two still simple reasons -− ethanol would be blended without a mandate, even though the RFS forces billions of dollars to change hands every year to force ethanol blending, and small refineries are not the entities doing the blending, which is why they suffer hardship in the first instance," she writes.

"Relief given to an upstream small refinery does not affect the downstream blender's decision whether or not to blend. The downstream blender is not obligated to blend and will make the decision whether or not to blend based on its best economic interest without regard to biofuel mandates."

Johnson Koch makes a case that granting waivers does not affect ethanol or other biofuels demand. However, the amount of ethanol blended in gasoline actually fell this past year for the first time since the Renewable Fuel Standard has been the law of the land.

"Due to infrastructure constraints, domestic biofuels producers cannot economically produce enough fuel to meet the biodiesel-specific mandate, let alone the 15-billion-gallon conventional biofuel requirement," she writes, although both industries have the production capacity to do just that.

"For the same reasons, they are also unable to blend 15 billion gallons of conventional ethanol into gasoline. Thus, setting aside the fact that hardship relief does not destroy demand, domestic biofuels producers would still reap no economic reward from less hardship relief because they do not have the capacity to produce or blend more biofuels and ethanol. Accordingly, the secretary's assertion of influence over small-refinery hardship relief would not only be improper, but also unproductive for the domestic ethanol and biofuels industries."

Johnson Koch said her clients "urge the administrator to issue the 2018 decisions as soon as possible" to avoid a lawsuit.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN

(TN)

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